Chamber News

Ulster Bank PMI for NI – February 2011

Overall Comment“Northern Ireland firms continued to report falling levels of activity, employment and new orders last month. Nevertheless, there were some signs of encouragement. All of the indices within the latest report improved relative to the previous survey, with the pace of decline in some areas improving dramatically. Overall, firms reported a further fall in output, but the latest outturn was the closest to the 50.0 reading (the threshold between expansion and contraction) since December 2009. The biggest improvement, in terms of output and new orders, was within the services sector. Business output within the service industry was basically flat, its best reading since November 2009. Similarly, the new orders index, whilst still indicating a contraction, also reached its highest reading in fifteen months. This represents a significant departure from the break-neck rates of contraction witnessed in recent months. Furthermore, the continued growth within the UK as a whole, alongside the rebound in business activity in the Republic of Ireland, should benefit an increasing number of Northern Ireland firms in due course.

“Employment levels within Northern Ireland’s private sector firms declined for the 36th consecutive month in February. Indeed, Northern Ireland was the only UK region not to post a rise in workforce numbers in February. That said, the pace of job losses eased significantly relative to January and was the weakest since May last year. The local manufacturing industry, however, bucked this wider trend and was the only sector to report an increase in staffing levels last month. Firms within the service industries signalled a relatively modest decline in staff numbers, but the construction sector continues to shed workers at a rapid rate.

“The other key challenge facing local businesses is inflation. Despite the fact that the rate of increase in input prices eased in February, inflation remains at elevated levels and the survey pre-dates the recent surge in oil prices that occurred in the second half of February. Therefore a further pick up in the rate of inflation is anticipated. Moreover, the ability of firms to pass on these costs remains limited and is currently confined to just the retail and manufacturing sectors. The net result is the squeeze on profit margins remains intense, across all sectors, but is most acute within construction.”